POTENTIAL FOR REGIONAL USE OF EAST AFRICA’S NATURAL GAS

Prof. Vijay ModiColumbia UniversityColumbia University

Addis Ababa, June 2nd, 2014

Authors: Jonathan Demierre, Morgan Bazilian, Jonathan Carbajal, Shaky Sherpa, Vijay Modi

MOTIVATION

• Longer term view• Substantial fuel needs in cooking,

transport, fertilizer prod, industry, power• Same time, large gas finds• Same time, large gas finds• Also working on synergy with renewables• Benefits from similar integration in power• Shared prosperity: meeting domestic

needs in parallel with export incomes

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Projection of Primary Energy Demand

80

100

120

140

160

Tota

l Pri

ma

ry E

ne

rgy

Co

nsu

mp

tio

n

[tcf

]*China India Projection Sub-Saharan Africa

Total pop. = 1.35 Billion

CAGR = 5.4%CAGR = 6.1%

Total pop. = 2.0 Billion 1 tcf = 24.4 Mtoe

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Sources:

China’s and India’s consumption: EIA 2014

Sub-Saharan Africa’s projection: own calculations

Whole population (urban + rural)

CAGR = Compound Annual Growth Rate

0

20

40

60

1980 1990 2000 2010 2020 2030 2040 2050

Tota

l Pri

ma

ry E

ne

rgy

[tcf

Year

Total pop. = 1.24 Billion

CAGR = 5.4%CAGR = 6.1%

CAGR = 5.9%

*Natural gas equivalent

600

800

1000

1200

Urb

an

Po

pu

lati

on

[M

illio

ns]

Sub-Saharan Africa

CAGR = 3.2%

56% of total pop.

Urbanizing World: 45% of total by 2050 Eastern Africa (UN DESA definition)

0

200

400

600

1970 1990 2010 2030 2050

Urb

an

Po

pu

lati

on

Year

Eastern Africa

CAGR = 3.2%

CAGR = 3.9%

36% of total pop.

23% of total pop.

45% of total pop.

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CAGR = Compound Annual Growth Rate

Major Urban Centers of the Region

In 2050

6 Cities with

more than

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more than

12 million

16 Cities with

more than

4 million

Potential City Gas Demand in the Region

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Natural Gas: Which Uses and at What Price?

Est. Max Price at City

Gate* [$/MMBtu]

Alternatives

Cooking 10 - 20Retail Wood, Charcoal,

Kerosene, LPG

Power

generation12 - 48

Existing dispatchable generation

(from gas to diesel)

Transportation 25 - 52 Diesel, Gasoline

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Transportation 25 - 52 Diesel, Gasoline

Fertilizer

Production14 - 24 Retail imported Price

* Maximum natural gas price at city gate to compete with existing altenatives. An additional

$5/MMBtu is taken into account for distribution within the city (cooking) and an additional 25% is

considered for CNG at refueling stations (transportation).

A price at city gate < $10-15/MMBtu may allow a large penetration

of natural gas

Transmission Network: Baseline Scenario

Source

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Source

Production cost: $3/MMBtu

Max citygate cost ≤ $10/MMBtu

Pipeline trans network: $57 B

Supply: 4.2 tcf/yr

Avg City Gate cost: $5.2/MMBtu

Year 2050

Exports to South

Africa: 1.3 tcf/year

Transmission Network: High-Cost Scenario

Avg at City Gate:

$10.3/MMBtu

Ethiopia, Rwanda, and Source

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Ethiopia, Rwanda, and

Burundi not connectedSource

Year 2050

Exports to South

Africa: 0.8 tcf/year

Delivered Gas Cost for the Major Cities

6

8

10

12

14

Ga

s C

ost

at

Cit

y G

ate

[$

/MM

btu

]

Baseline High-Cost

Assumed production cost: $3/MMBtu

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0

2

4

6

Ga

s C

ost

at

Cit

y G

ate

[$

/MM

btu

]

Bujumbura, Addis Ababa, and Kigali not connected in the high-cost scenario (delivered cost > $15/MMBtu)

Population Benefitting in 2050 (baseline scenario)National-level population: 614 Million (urban+rural )

Countries: Mozambique, Malawi, Tanzania, Kenya, Uganda, Burundi,

Rwanda and Ethiopia

Population

Impacted

Assumptions

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Power 461 million75% access to electric grid

25% of electricity from gas

N Fertilizer

needs614 million 100% of urban + rural needs

Countries: Mozambique, Malawi, Tanzania, Kenya, Uganda, Burundi,

Rwanda and Ethiopia

Population

Impacted

Assumptions

Population Benefitting in 2050 (baseline scenario)Urban population supplied by gas: 185 Million

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Impacted

Cooking 185 million100% of the population in

connected cities

URBAN

Passenger

transport

185 million85% of LDV and Public

transport in connected

cities

Consumption by Sector in 2050

Baseline ScenarioCountries: Mozambique, Malawi, Tanzania, Kenya, Uganda, Burundi, Rwanda and Ethiopia

Fertilizer,

23%Transport,

27%

Pie Chart: 2.4 tcf

Other indus/commercial: 0.5 tcf

Exports to South Africa 1.3 tcf

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Cooking,

12%

Power,

39%

27% Exports to South Africa 1.3 tcf

TOTAL: 4.2 tcf/yr

Fertilizer Production

Production

Transmission

Profit (assumed $5/MMBtu)

Estimated max price at city gate to compete with current alternatives

Similar Profits than with LNG exportsEstimated profit for LNG exports to Japan (medium term): $1-7/MMBtu

Assuming $5/MMBtu profit for the domestic market, natural gas would still be a

very affordable alternative

0 10 20 30 40 50 60 70 80

Average Price*

Max Price*

Cooking

Power Generation

Transportation

Fertilizer Production

Gas Price at City Gate [$/MMBtu]

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*Baseline scenario

CAN THE POOR PAY FOR ENERGY SERVICES?

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SOLAR MINIGRID DEPLOYMENTS IN UGANDA AND MALI. PAY-AS-YOU-GO SMART MODULAR MINIGRIDS

3.06 USD/kWh Day

3.83 USD/ kWh Night

1.15 USD/kWh Day

3.06 USD/kWh Night

1.15 USD/kWh Day

1.92USD/kWh Night

Version 1: 40 cm x 30 cm x 20 cm

10 Consumer System: Metering + Communications

Version 2: 15 cm x 7 cm x 7 cm

Needed Investment by Sector by 2050

Baseline ScenarioCountries: Mozambique, Malawi, Tanzania, Kenya, Uganda, Burundi, Rwanda and Ethiopia

Investments [Billion $]

Needed investments in the 4 main sector to develop the demand in addition

to the $57 Billion for the transmission system

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Distribution Networks within Urban Centers 13.9

Power Plants 43.9

CNG Refueling Stations 9.3

Fertilizer Plants 33.2

Total 100

GUJARAT, INDIA: A CASE STUDY IN GAS AND GAS INFRASTRUCTURE FOR DOMESTIC GROWTH

Mr. PandianMr. PandianAdditional Chief SecretarySec, Energy and Petrochemicals

CHICKEN AND EGG PROBLEM• No market demand without infrastructure• No infrastructure without market demand• Infrastructure and Market demand useless without

assured gas supply!

• Gujarat had domestic gas so a study was carried out to use domestic gas

• Even with R-LNG it is viable today in Gujarat • Of course with domestic piped gas is much better

STATE GOVT. GROWTH STRATEGY FOR STATE GOVT. GROWTH STRATEGY FOR GASGAS• Integrated

Transmission Gas Grid +City Gas

Distribution Networks

• Indigenous Gas Sources + LNG Terminals for Import of gas

Securing Gas Supply

Develop Gas Infrastructure

• Gas Power Plants

• Fertilizer Plants

• (Anchor Load Projects),

• State wide City Gas projects , Large and SME industries , CNG,

PNG

• Government Policy Support

Encourage Gas Demand

Government Act as a

Facilitator

IN WHAT ORDER WAS IT DONE? WITHIN A DECADEAnchor Loads • Power (State and Private) • Fertilizer (State actors to support agriculture) • Industry (Private, eg ceramic industry)

City Gas Distribution• Started with CSR demo. near LNG terminal• Domestic cooking (state and Private) • Public Transport (state)

GSPL GAS GRID

CGD COVERAGE IN GUJARAT

Sr.

No.

Name of

CGD

No of

Ind. Cust.

No of

Domestic

Cust.

No of Com.

Non-Com.

Cust.

No of

CNG

Stations

CNG Sales

tons/Day

No of CNG

Vehicle/Day

Daily Gas*

Sales

(MMSCMD)

1 GSPC Gas 1,892 490,000 1,893 159 445 90,000 5.00

3 GGCL 794 440,000 8,951 57 275 64,000 2.60

5 Adani Gas 760 190,000 1,460 52 320 62,300 0.88

26

Total 3,789 1.3

Million15K 331 1200 254K 9.90

STATE URBAN POPULATION 3 Million HH

Done in 10 years

HOW?

Total CGD Infrastructure Total CGD Infrastructure –– 15000 15000 KmsKms (Steel & PE)(Steel & PE)

GAS TRANSMISSION NETWORK IN GUJARAT

2174 KMS OPERATIONAL, 500 KMS UNDER PROGRESS

CITY DISTRIBUTION

• Typical CNG+PNG city network • Cost Rupees 250-300 crores ($50 million)

to supply 1.5 MMSCMD of gas• $5M/yr for 15 Million MMBTU/yr• $5M/yr for 15 Million MMBTU/yr• With O&M and profit: $4/MMBTU• Large cities could be $3.50

ADDED NEW PUBLIC TRANSPORT CAPACITY

CNG BUSES and RICKSHAWS

ANCHOR PUBLIC DEMAND

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TODAY:

HH of 5 spends $6/month on cooking

CAN BE DONE

Took Political Will and Administrative skill

Thank you

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Thank you